Chrysler's Winning Formula: Hot Cars + Flexibility

Chrysler's Winning Formula: Hot Cars + Flexibility

Hot new models are behind Chrysler Group's renaissance, a profit rebirth that Tom W. LaSorda, president and CEO, wants to support and grow via a program of flexible manufacturing.

The concept: empower Chrysler Group's North American plants to more quickly respond to changing market demands while increasing facility utilization. His strategy: heavy investments in the latest robotic technology to power a new level of flexible automation with a greater emphasis on employee workplace culture and supplier relationships. The results easily translate into a competitive edge via a faster response to customer product needs and preferences. Since late 2003, Chrysler has invested billions of dollars in a flexible manufacturing initiative that will also increase quality, plant utilization and profitability while enabling a growing number of lower-volume nameplates. Consider the Chrysler initiative as a role model example for U.S. manufacturing, says Jay Baron, president, Center for Automotive Research. He says his current research on flexible manufacturing indicates the strategy can be an effective competitive tool across all manufacturing sectors.

Not only is LaSorda a car guy, he's also a manufacturing guy who came up from the manufacturing floor to become Chrysler Group's president and CEO. He knows cars and manufacturing and his team is leading a competitive synergism at Chrysler Group. Part of this team is Frank Ewasyshyn, executive vice president, manufacturing, and Peter Rosenfeld, executive vice president, procurement and supply.

In addition to developing more hot cars, such as the Chrysler 300 and the Dodge Magnum, LaSorda's team is backing them up with a manufacturing approach to shift production as rapidly as customer tastes gravitate from one Chrysler model to another. LaSorda says success today depends on how an automaker answers the following question: "When [a model] is hot today and in three years it's not hot anymore, how fast can I put another one in its place?" LaSorda recalls Chrysler's earlier years, when rapidly growing customer acceptance of models such as the LH and the Durango were stymied by the company's inability to produce them at other facilities. For models that do not turn out to be hot, a flexible manufacturing strategy offers the option of shifting production to other models, adds LaSorda.

Tom W. Lasorda, Chrysler President and CEO

While that kind of manufacturing flexibility sounds expensive, it's lowering production costs so much that LaSorda claims competitive reasons prevent him from disclosing the extent of the benefits. He does offer hints -- one being a 40% to 50% reduction in the cost of making dies for new vehicle programs.

As a competitive tool, Chrysler's flexible manufacturing initiative supports an aggressive product strategy. LaSorda says $30 billion is being invested in the product program over the next five years. That means a proliferation of new models. In February, at the Economic Club of Chicago, LaSorda noted that Chrysler Group will roll out 10 all-new products in 2006. "In the 82-year history of our company, we've never launched more vehicles in a single year."

The Flexible Journey

LaSorda told IW that his vision for flexible manufacturing accelerated when he headed manufacturing in Chrysler's powertrain operations. "I found we had all the technical knowledge on [flexible manufacturing], but I didn't see it evident in any of the plants to the degree we should have." The next step: goal setting with Ewasyshyn.

"It started with a simple question that almost sounds visionary now: How do we get flexibility without the constraints of hard tooling? We wanted multiple products to be built in every plant and the ability to swing product from plant to plant."

The motivating issue: the difficulty of accurately forecasting demand. "So we wanted easy flexibility to assign models both within and between plants," adds LaSorda.

Changeover speed could not be left out of the flexibility initiative. "We wanted to do changeovers in hours or days versus weeks -- not only to save money but to rapidly gain market share when a product is hot," emphasizes LaSorda.

Ewasyshyn and LaSorda found the heightened capability of robots to be the flexibility solution for the body shops at Chrysler's assembly plants. With their programmable flexibility and the ease of changing, end-effectors robots became a viable alternative to autodom's traditional reliance on dedicated tooling investments. In addition, the latest generation of robots included the heavier load-carrying capacities (750 kilograms) required for body assembly, adds Ewasyshyn.

"With robots we got four-[vehicle]-model flexibility cheaper than what we would have paid for the one-model rigid automation in the past."
-- Frank Ewasyshyn, executive vice president, manufacturing
Easy flexing with consumer demand is only one of the strategic benefits Chrysler is gaining at its assembly plants. Adds LaSorda: "When we did put in the flexible [robotic] tooling, we found substantial savings compared to conventional hard automation."

Adds Ewasyshyn: "With robots we got four-[vehicle]-model flexibility cheaper than what we would have paid for the one-model rigid automation in the past." In addition, while robot sophistication and load-carrying capability has increased, pricing has come down quite a bit over the last five years, notes Ewasyshyn. How much? Approximately 50%, says Chrysler's Bob Barstead, director of advanced manufacturing engineering.

Leveraging the multiproduct flexibility that is possible with robots requires process discipline, observes Ewasyshyn. "For example, multiple products must share some form of common order. Ewasyshyn describes the sequence as "a bill of process" that is the natural evolution of collaboration between product design and manufacturing engineering. The other issue is the number of process steps. "Manufacturing and engineering need to operate within guidelines regarding future product direction. These include the number of assembly steps, what they are and their natural ascending order."

Chrysler's flexible manufacturing initiative illustrates an impressive moral. It demonstrates the possibility of enhancing competitiveness through optimization practices that cost less than what they replace, says Jay Baron, president, Center for Automotive Research, Ann Arbor, Mich.

"Best of all," says LaSorda, "those dramatic cost benefits will continue as we do our future model changes." Adds Ewasyshyn: "Once the robot base is installed, adapting it to future production merely requires changing end effectors, a commodity consideration. The approach is less costly initially and less costly to adapt to future product changes. Those future accommodations of the robotic system will typically involve only low cost, standard or commodity items -- a pile of end effectors versus several hundred thousand square feet of tooling." He says the robotic approach replaces a lot of custom machine and toolmaker work. Ewasyshyn predicts a huge impact on the tooling business.

His predictions also include new freedom of parts processing. "One example could be robots facilitating the replacement of spot welding with laser welding, which might reduce the number of steps needed to put the product together. As long as the joining technology can be carried by a robot, the system doesn't care," adds Ewasyshyn.

He also predicts the trend to flexible manufacturing also will decrease space a company might commit to manufacturing. "One way is through the lower space needs for robots -- the end effectors that adapt them to a new assembly job take little rack space. The other way is through the ability of flexible manufacturing to facilitate the optimum use of a production area."

Supply-Chain Challenges

When LaSorda's team made the commitment to the flexible manufacturing model, it became a leadership issue not just for Chrysler Group internally but for its entire supply chain. Suppliers now would be encouraged to also embrace the same flexibility vision -- thinking in terms of days or weeks instead of months, says Chrysler's Rosenfeld.

"We don't harass them or own them. We just want to grow them."
-- Peter Rosenfeld executive vice president, procurement and supply, referring to suppliers
Rosenfeld says his challenge is to establish relationships with suppliers that encourage them to do their best work for Chrysler Group. He says the most effective means is through objectivity, transparency and emphasizing that excellent performance results in significant rewards from Chrysler Group. An example is the company awarding Johnson Controls approximately $1 billion in incremental business for 2007-2009 programs. "The data show that the company embraces the concept of reward for performance."

He emphasizes supplier relationships as two-way streets. "I realize that I don't hold all the cards, and I don't want to pretend that I do by hovering over suppliers with the proverbial big stick."

Unlike other OEMs the company does not establish equity positions with suppliers. "We don't harass them or own them. We just want to grow them," adds Rosenfeld. "Even without an equity position, we can have a similar impact as an equity investor in that we do pursue long-term relations with suppliers because we know those lead to innovative approaches to our supply situations."

Have all of the suppliers bought in? "To say we're 100% there would probably be going too far. But let's face it, our supply base is supporting us." As examples, he cites the Belvidere and Brampton plants. He admits that Chrysler Group has not yet been fully explicit, "but we are clearly pursuing the implementation of flexible manufacturing at various plants and our suppliers are supporting us.

We need to do more, and those discussions are ongoing with our highest-rated suppliers." Rosenfeld says the suppliers' involvement is absolutely an important driver for market success as well as the enhanced manufacturing efficiency that is being pursued. He says the suppliers' actions indicate that they have philosophically bought in.

The Belvidere Example

LaSorda says the Belvidere, Ill., assembly plant is the first in Chrysler Group to use a body shop that consists entirely of robotics and is free of vehicle-specific heavy tooling.

The new 780 robots supplied by ABB in Belvidere's body shop make necessary tool changes automatically, within a 45-second cycle time. That gives the 3.7 million-square-foot facility the flexibility to build three vehicles, including the new 2007 Dodge Caliber and the Jeep Compass. In addition, Chrysler says the same line can pilot build a fourth with no impact on production.

This new process allows the company to vary model-by-model production volume to better meet customers' preference and make the changeover to next-generation models simple and cost efficient. Projected volumes (determined by market research) can be varied up to 100%, says LaSorda. "The issue now becomes -- how flexible is the supply base? That's our next journey."

The new flexible robotic body shop, already partially in place at other plants, will be fully implemented next at Chrysler Group's Sterling Heights, Mich., assembly plant and the St. Louis South (Fenton, Mo.) assembly plant.

Belvidere's new direction doesn't come without challenges. One is the training within the plant in connection with the new ABB robots and controls, LaSorda says.

"The robots themselves are not that difficult, but now it's a question of going from a couple hundred robots to more than 700. And with the absence of hard automation, programming of controls and computers now substitutes for the mechanical adjustments of fixtures and tools."

LaSorda says the other issue is that any enterprise optimization requires all the functional parts of the organization to integrate and work together more effectively.

The 2005 Performance

Tom W. LaSorda and his team at Chrysler Group could take a bow -- having helped Daimler profits to rise despite problems at Mercedes. Chrysler Group posted an operating profit of $1.9 billion in 2005 compared with an operating profit of $1.7 billion in 2004.

In contrast, GM last year lost $8.6 billion, much of it in North America (Revised to $10.6 billion in March). Although Ford's 2005 earnings totaled just over $2 billion, its North American operations experienced losses. (Both GM and Ford announced plant closings involving more than 50,000 job losses.)

"When you go in this direction, you obviously need the product-design team with you on the process side. We call it process-driven design, so that the design has to be in the common sequence of all the products that move into this area. Except for architectures like trucks, we're quite fortunate for the fundamental product design similarities."

For example, LaSorda explains how similar underbodies facilitate manufacturing flexibility at Belvidere. To achieve the different products, the concept is to, in effect, morph differing "top hats" onto underbody structures that are -- with some tweaks -- pretty much the same.

Shared underbodies also accelerate product launches and improve quality. Subsequent launches are easier, and the time required to put the third product in versus the previous two is much, much faster, LaSorda adds.

The new body shop and other upgrades at Belvidere are part of a $419 million total program investment that was announced in January 2005 and started production February 1, 2006. LaSorda says Belvidere, the assembly plant that began production with the 1965 Plymouth Fury and Dodge Monaco, is now equipped to compete with any assembly plant in North America.

Belvidere's Sequencing Center

In addition to robots, Belvidere enhances manufacturing flexibility with an inbound parts sequencing center. Connected by tunnel to the assembly plant, the 500,000-square-foot center is run by TDS/US -- one of Chrysler Group's largest minority-owned suppliers.

The concept is to simplify the presentation of incoming parts for vehicle assembly. Consider, for example, that 2,300 different parts must come together to produce each 2007 Dodge Caliber. And that's a small car.

In addition to sequencing, the center provides parts metering, kitting and container management for the completed subassemblies it delivers to the assembly plant.

After arranging the parts in kits for individual workstations, delivery is made to the assembly plant end of the tunnel where Belvidere employees distribute them on the production floor. The idea is to maintain in-plant stocks at optimal levels and minimize delivery time.

Chrysler Group Announcement Dates of Plant Investments Since Late 2003
(includes major Flexible Manufacturing Investments at Belvidere, Ill., Toluca, Mexico, St. Louis North and South and Sterling Heights, Mich.)


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